The Demand Solutions Blog

Donald Davidoff

Recent Posts

How to Win Big in a Downturn with Revenue Management

Posted by Donald Davidoff on Jul 7, 2020 9:19:06 AM

Watching pricing performance since the downturn started and reflecting on all the things we've done with our clients over the past three months reminds me of a key lesson I learned about pricing and revenue management (PRM) in the 2002-03 and 2008-09 recessions. The opportunity to outperform competitors with PRM is actually GREATER in a downturn than in growth conditions.

That may sound a bit odd until you consider a few realities of PRM and recessions. For example, we should recognize the psychological bias that PRM systems are there to help increase rents. In reality, they exist to maximize rental revenue. Most of the time, that means controlling the pace of rent increase, but there are times when maximizing revenue means lowering rents to grow or protect occupancy. Not surprisingly, a recession is one of those times.

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Topics: Revenue Management, COVID-19

Is Your Fall Revenue Management Playbook Ready?

Posted by Donald Davidoff on Jun 1, 2020 2:58:55 PM

Each week we have been summarizing insights from our weekly "downturn" round table conversations. This week we share a few highlights of our most recent call (May 27), as we prepare for a webinar on the pressing issue of how to prepare for fall 2020. If you haven't done so, please register for our Webinar "The Gathering Storm - Revenue Management Planning for Fall 2020," which took place June 3, at noon.

On our most recent call, we continued what is now an almost 2-month long trend as participants reported consistent improvement in leasing:

  • [Denver based] Last week's leasing was fantastic. It's been building for a few weeks. This week started off strong.
  • Saw a significant shift in leasing over the past two weeks in Orlando with 26 leases. We think the announcement about Disney and Disney Springs reopening may have shifted the tide. 

However, urban coastal markets continue to lag in leasing more than the rest of the nation. They are improving, as indicated by one operator sharing, "Leasing has been great over the past two weeks, but we are still down 29% on year-to-date applications. We haven't quite caught up, but if we can [sustain this] pace going forward, that will definitely be nice."

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Topics: Revenue Management, COVID-19

Multifamily Downturn Q&A - May 26th, 2020

Posted by Donald Davidoff on May 26, 2020 12:21:37 PM

Each week our "downturn" roundtable enables us to discuss current pricing and revenue management (PRM) issues with some of the most experienced PRM practitioners in the industry. Each week we summarize the most recent insights. 

Below we summarize the audience responses to prompts (all answers are anonymous) on our most recent call (May 20) along with some information we re-shared from RealPage. If you have different insights or questions that you would like us to address in the coming weeks, please leave them in the comments or contact us through the site.

This week we opened up with a discussion about some key metrics we saw in a RealPage blog:

  • Despite the pandemic, occupancy April remained well above the prior ten-year average and slightly above April 2019. Strong February and March occupancies helped with that as April 2020 occupancy was below March 2020. Normally April occupancy is higher than March
  • Through mid-April, canceled move-outs were roughly double the historical norm. We look forward to future reports to see how long this tailwind sustains
  • Retention rates in April were at least 400bps higher than normal (at 57.9%)
  • All the above was at the expense of rent growth. Effective asking rents went from >2.5% YOY to 1.0%, the largest drop we've seen in our entire history in the industry
  • The focus on asking rents can be misleading: executed effective rents were down 4.5% YOY, and likely will drop further

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Topics: Revenue Management, COVID-19

3 Reasons Multifamily Needs to Prepare for September 1

Posted by Donald Davidoff on May 20, 2020 8:00:00 AM

During these first few months of the COVID-19 crisis, the two things that multifamily operators are most concerned about are rent collections and leasing volumes. So far the results have been more than a little bit interesting (and to many people counter-intuitive).

On the leasing side, we saw a massive drop in demand in the first three weeks. Overall, leasing was down more than 50%, and some urban coastal markets were down 80-90%. Since then, however, leasing has recovered such that most secondary and tertiary markets are now at or above prior year volume while the urban coastal markets are generally within 20-25% of prior year volumes.

Meanwhile, rent collections were a topic of great angst, first for April 1; then, when April numbers came in generally off only 4-6 points from prior year, there was a great concern that May 1 could be a disaster. Based on data from NMHC, May appears to be coming in slightly better than April.

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Topics: Revenue Management, COVID-19

Multifamily Downturn Q&A - May 18th, 2020

Posted by Donald Davidoff on May 18, 2020 10:21:36 AM

For the last few weeks, we have been running a weekly "downturn" roundtable discussion for our clients (a group that includes some of the most experienced pricing and revenue management practitioners in the industry). Each week we have been summarizing the insights that were shared during our latest discussion.

The content below summarizes audience responses to three prompts (all answers are anonymous) on our most recent call (May 13th). If you have different insights or questions that you would like us to address in the coming weeks, please leave them in the comments or contact us through the site.

This week we opened up with a discussion about demand as we enter week nine of the crisis. We shared some statistics from our own internal aggregate data that showed very similar patterns to early RealPage and Yardi numbers. To summarize:

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Topics: Revenue Management, COVID-19

Taking Stock: Nine Weeks Into COVID 19

Posted by Donald Davidoff on May 11, 2020 9:28:44 AM

As we enter the 9th week of the public health and the ensuing economic crises, it’s probably a good time to take stock. It’s been a bit of a roller coaster, and the ride is clearly not done yet.

The first three weeks starting March 16 were brutal. We saw leasing drop by more than 50% and more like 90% in markets like New York, the San Francisco Bay area and the Greater Los Angeles Metro area. These numbers appear consistent with data that RealPage and Yardi have released.

Since then, numbers have been remarkably good: leasing has risen every week since then and is now on par nationally with last year. The three markets above appear to still be off 20-25%, but some other markets are showing YOY increases [we should note that Realpage is reporting a roughly 6% decline in rent, so leasing activity is coming at a price]. Rent collection was off roughly 4 points in April, but NMHC has reported through May 6 that May collections are trending 2 points better than April.

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Topics: Revenue Management, COVID-19

Multifamily Downturn Q&A - April 27th, 2020

Posted by Donald Davidoff on Apr 27, 2020 10:23:49 AM

For the past few weeks, we have been holding a weekly "downturn" roundtable discussion for our clients. This group includes some of the most experienced pricing and revenue management practitioners in the industry. Each week we have been summarizing insights shared during our latest discussion.

Below we share our observations of the first five weeks of this recession, with the Q&A that followed the presentation. All responses are anonymous. If you have different insights, opinions, or questions that you would like us to address in the coming weeks, please leave them in the comments or contact us through the site.

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Topics: Revenue Management, COVID-19

Why This Downturn is Different for Multifamily

Posted by Donald Davidoff on Mar 26, 2020 4:01:22 PM

I often think of the economy as a metaphorical set of pipes with money (the "water") flowing through them. Recessions typically happen when the pipes "clog," causing the water to flow well below its normal pressure. Governments have to respond, taking actions to "unclog" those pipes to get the "water" flowing again.

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Topics: Revenue Management, COVID-19

Coronavirus: Catalyst or Catastrophe?

Posted by Donald Davidoff on Mar 10, 2020 11:46:06 AM

I’m writing this sitting on an airplane wondering whether this week will be the last week I travel for quite a while. As the level of fear (dare I say panic) continues to rise, we’re bombarded with exhortations to wash our hands frequently (easy to do), stop touching our face (virtually impossible, just try to do so for even 15 minutes) and dispense with handshakes, hugs and even standing within 6 feet of one another. While I keep telling myself (and I fervently believe) “This, too, shall pass,” I can’t help feeling a sense of anxiety driven by the uncertainty of it all.

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Topics: COVID-19

What Multifamily Gets Wrong About Renovation Pricing

Posted by Donald Davidoff on Feb 20, 2020 9:27:09 AM

(This is the third blog in our current series on amenity pricing)

It’s a classic conversation that will be familiar to every revenue manager who has ever had rehab units in their portfolio:

Property Manager: “I need to lower my one-bedroom prices”

Revenue Manager: “Ok. What, exactly, makes you feel that way?

Property Manager: “I’ve got a few units that have been sitting vacant too long”

Revenue Manager: “Anything those units share in common?

Property Manager: “Yeah, they’re the units we’re doing the rehab on.

Revenue Manager: “Ok. Then we really need to reduce the upcharge for the renovation on those units, not reduce the price on all 1-bedroom units”

Property Manager: “I can’t do that!” “Then I won’t get the ROI I need on those rehabs!!”

We have told that story many times, and every time we tell it to a revenue manager (or group of revenue managers), we get that immediate, knowing smile.  Yet despite this familiarity, this script keeps repeating itself. Why? And what can we do about it?

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Topics: Revenue Management